March 4, 2011

Brazil's poultry industry turns to domestic market

With demand for Brazilian poultry meat stagnant in several overseas markets, Brazil's poultry industry is turning increasingly to the domestic market.

The steady rise in the value of the Brazilian currency, the Real, against most other currencies has made exporting less profitable. Although poultry meat exports earned a record US$6 billion last year, 17% more than in 2009, revenues in the local currency in which costs are incurred, did not increase so much. Strong economic growth and the even faster growth in consumption, encouraged by cheap imports and easier access to credit, have made the domestic market steadily more attractive.

Over a million tonnes of the additional 1.3 million tonnes of poultry meat produced last year, when output totalled 12.3 million tonnes, was sold on the domestic market, an increase of close to 20%. Exports on the other hand increased by just over 5%, an extra 170,000 tonnes. Due to the increasing importance of countries in the developing world, notably in Africa, Asia and Latin America, where incomes are relatively low, most of the growth in exports last year was of whole birds, which costs less than normal cuts, salted cuts or processed products.

The strong growth for whole birds is in contrast to the pattern of the past 20 years, when the share of the market of whole birds had fallen steadily, with more cuts and processed products being sold year by year.

Six percent less processed products and salted cuts, the majority destined for Europe, were sold last year as in the peak year of 2008. As prices were lower, export earnings from these products fell by 9% last year.

Last year, the amount of poultry meat consumed per capita experienced a rise of 15%, to a total of 8.4 million tonnes sold in Brazil.

Brazil's share of the poultry meat imported by EU countries has fallen from 76% of the total to 72% over the past two years, and 20% less was sold to the EU last year than in 2009.

Officials at the Association of Poultry Meat Producers and Exporters, Ubabef, predict that 3-5% more chicken will be exported this year, an extra 200,000 tonnes or so. More than 525 million chicks have been lodged in each of the past three months, which will mean over a million tonnes of meat will be produced each month this year. The main constraint this year, is that due to the sharp increase in the price of corn and soymeal, the price of poultry meat has risen by 20%, narrowing the gap between it and the cheaper cuts of beef.